Why ranking employees by performance backfire


When Bill Michael, the former chairman of KPMG, spoke to the staff “Stop lamenting” At the virtual meeting in February, one of the issues they complained about was the “forced delivery” model used to evaluate their performance. This method of evaluating people is a zombie idea. No matter how many times it proves disastrous for the culture or morale of an organization, it refuses to die.

Generally speaking, “forced distribution” or “stack ranking” methods divide employees into a certain percentage of top performers, average performers, and underperformers each year. In the UK Senior Civil Service, for example, the ratio Was fixed Until the system is reformed in 2019 at 25, 65 and 10 percent, respectively.

The idea is to avoid “grade inflation” and force managers to have honest conversations with those who are sub-equal. Jack Welch, former chief executive of General Electric, Said in 2013 He did not understand why people thought this was cruel. “We grade kids in school, often under the age of 9 or 10 and no one calls it cruel. But some adults can’t take it? Explain it to me. ”

There are situations where it works. A former accountant trainee said he was willing to endure long hours and frustrating work only if he was likely to be promoted. He told me, “In that context you really need to know if you are in the 25th percentile or the 75th percentile.

But there are many more examples where the method fails even on its own terms. The big problem is that it combines someone’s perfect performance with a relative performance against their peers. You can fulfill all your objectives, for example, still located at the bottom and have a strong team with the label “Under Performing”. Sarah Nixon, a researcher at the Institute of Government Think-Tank, said the UK government’s “deep dive” into the forced distribution of civil servants found that “the bottom ten per cent of people were not very skilled”.

Not only does it feel unfair to the employee, it feels deeply uncomfortable for the line manager. “What’s wrong with your people meeting expectations, doing 3rd grade, but there were 1s, 2s and 3s so there was pressure to give them a 4 and put pressure on their improvement plans,” a former director of accounting firm told me.

In many organizations line managers offer temporary grades and then spread the overall distribution in “moderation” meetings with other managers. But it is difficult to rank people by purposefully doing different things in white collar jobs. “You wanted to sit in the house of people who just knew each other, comparing apples to pears,” said the second director of another firm.

Several line managers told me they had gaming the system. They kept the newly joined people in the lower brackets, because they were easy to sacrifice. Or, conversely, they tried to hang on to weak performers so they could put them down and protect everyone else.

The system can also disrupt teamwork. Microsoft’s Compulsory Distribution Ranking System (since canceled) Was blamed To create a toxic culture in the early 2000s that stifled innovation. Good performers have reportedly avoided working together for fear of suffering in the rankings. People would quietly sabotage their colleagues.

Finally, these systems are often detrimental to morale, which damages the level of performance aimed at improving them. Research The response appears to have a moderate positive effect on average performance, but in the third case it reduces performance. The key is whether people think the response is fair.

Employees who express positive emotions after feedback tend to perform better in the future, while those who express negative emotions do worse. Only those in a better-than-average position will feel particularly satisfied with the forced distribution. As Nixon mentioned, this is simply by definition of minority. “Very good for your arrogance when you are told that you are a great actor, [but] I think the question is, does this outweigh the potential for everyone to move? “

Microsoft forcibly canceled the distribution in 2013. The UK’s Senior Civil Service pursued the case in 2012. KPMG has told me that it plans to “move further away” and “bring more flexibility” to the system.

Since the outbreak, the HR department has had to rethink many of the old ideas. The counter-product of forced distribution should be an idea of ​​pseudoscience that eventually dies.

sarah.oconnor@ft.com



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